Avoiding Greece's tragedy

Posted: July 5, 2011 - 7:57pm

The following editorial appeared in the Chicago Tribune:

On the surface, the economies of the United States and Greece have almost nothing in common. One’s big, the other small. One’s diverse, the other tourist-centric. One nation collects its taxes due, the other has made tax evasion a national pastime.

Americans and Greeks are in hock up to their eyeballs, but the United States has the capacity to avoid default. Greece is on the brink.

Take no comfort in the many differences, however. The violent protests in Athens show what happens when debt grows so large that it crushes a people, a nation.

The United States needs to deal with its debt before it grows so large as to crush us. It’s time for a breakthrough in the deficit reduction talks between President Barack Obama and congressional Republicans. The longer they wait to address an inflated federal budget and a $14 trillion-and-counting national debt, the more draconian the fixes will be.

Don’t believe it? Consider Greece.

For all its dysfunction, the tiny Aegean nation at least has a plan to reduce its obligations and start to live within its means. Under threat of financial ruin and a whiff of tear gas in the air, it has hammered out a road map that its European Union backers say it must adopt.

America has no such road map. Its political leaders are still enjoying the luxury of arguing about whether defense cuts and tax increases make sense, whether entitlement programs need a wholesale chop or a trim around the edges. Washington officials are enjoying the luxury of playing politics with the U.S. economy. In time, though, runaway debt will curtail those options, and it won’t be pretty.

Greece, by contrast, has put practically everything on the table.

Its fiscal plan would slap an income tax on those making as little as $11,454 a year and a tax hike on those making $17,181 and up. The “self-employed” — famous in Greece for dodging taxes — would begin to pay a minimum flat amount. A surcharge could double heating-oil bills. A tax on restaurant and bar tabs would go from 13 percent to 23 percent.

Under threat of internal revolt, the Greeks revised their fiscal plan to reduce unpopular spending cuts. But the plan still digs deep: It would introduce means testing to slash social benefits. It would whack prescription drug subsidies and reduce defense spending every year through 2015. The government would use attrition to chop its public-sector employment, replacing only a fraction of those who retire.

Wanna buy a piece of Greece? Now’s your chance. From Athens Water to Hellenic Telecom, the government has set out to raise cash by selling state-owned assets. Ports, highways, beaches, mining rights and even a sports-betting franchise all would go up for grabs, though buyers could be hard to find.

In pushing for legislative passage of his fiscal plan in a crucial vote today, Greek Prime Minister George Papandreou called the measure a matter of “survival, growth, justice and a future.”

No, we’re not Greece. We’re not there yet. But we’re hurtling in the wrong direction, and the stakes here are much, much higher. America cannot afford to wait until its unsupportable debt forces punishing, economy-crushing taxes or a national sell-off of assets.

We have to deal with this right now. The deadline for dealing with the national debt ceiling has to create a deeper sense of urgency than we see in Washington. Watch Greece. Watch closely.